The need to solve Australia’s productivity issue has never been more pressing. The unprecedented rise in Australia’s terms of trade – the ratio of exports to imports – is now in decline due to falling commodity prices, meaning lagging labour productivity is not being offset like it once was.
Organisations are seeking out new ways to improve productivity, address skills shortages and combat economy-wide challenges in talent sourcing – but urgent solutions are required. They realise the significance of these problems and understand that maintaining the status quo will simply intensify competition in the short term and hinder enterprise growth in the long term. The question is: what do they need to do differently?
Despite grasping the need for change, very few companies are taking the necessary measures to resolve these issues. Accenture recently surveyed the c-suite executives and HR leaders of Australia’s 500 largest organisations about their human capital strategies, and found that a significant gap exists between the importance they attribute to human capital initiatives and the effectiveness of how these initiatives are executed. The fundamental driver of this gap is ineffective use of human capital analytics, with leadership teams remaining overly reliant on qualitative decision-making despite continued moderate returns.
The five areas
The research examined five key areas: productivity, human capital issues and barriers, leadership, talent management and human capital analytics. The results showed that while nearly 70 per cent of organisations felt their level of investment to improve work-force productivity was not meeting expected outcomes, only a small proportion of Australian organisations were making major decisions about their workforces with enough data analysis. As a consequence, the link between human capital investments and financial capital returns is being missed.
Organisations that fail to put data at the centre of their decision-making processes are unable to purposefully shape their organisation’s futures, missing opportunities to manage talent and direct initiatives towards the longer-term needs of the business. Without a strong predictive analytics capability, companies struggle to effectively measure employee behaviour, leadership success or workforce capabilities – and rob themselves of the ability to forecast not only what decisions need to be taken, but also how those decisions will play out over time.
Leadership teams need to make more informed decisions around their present and future human capital needs, and a depth of analytical capability will drive this. It will allow them to adapt quickly to changes in external conditions – such as volatility in global financial markets – and provide the insights necessary to match business ambitions with workforce requirements.
Accenture’s research showed that companies think very tactically about their workforces, rather than strategically.
Four simple steps can address this imbalance, significantly altering the design and delivery of workforce management strategies. Organisations must:
- Identify and give priority to critical human capital issues central to business strategy execution.
- Establish an enterprise-wide analytics capability that provides leaders with human capital insights based on a range of tactical and strategic analytical techniques.
- Adjust governance processes and leadership behaviour to use human capital analytics as a means of improving human capital decision-making.
- Use analytics-driven insights to design and implement targeted human capital initiatives that employ leadership, talent, organisational and cultural solutions to achieve better business outcomes.
Despite HR’s pronounced role in any organisation, several company leaders are yet to buy into the value it can add to wider business performance. If HR departments can gain senior leadership support for an analytics-focused approach, a company can effectively overcome other barriers such as IT systems deficiencies and a lack of internal analytics capabilities. Simple and cost-effective remedies are available, such as in-house collaborations and partnerships, as well as software-as-a-service and outsourcing solutions.
If these issues can effectively be remedied, the power of analytics will allow organisations to act decisively on the back of evidence-based insights. Accenture’s experience with a number of clients suggests that an analytics-modelled talent supply chain can help organisations forecast workforce demand for up to two years with 95 per cent certainty. Similar project work has shown that modelling tools can predict workforce attrition and absenteeism rates with up to 90 per cent accuracy.
As Australian organisations look to manage their workforces amidst an ever-changing human capital environment, they must understand the value of modern technology and make better use of available data. Unless they take the necessary steps to implement analytics capabilities, human capital improvement initiatives will continue to deliver poor returns and ongoing productivity issues will refuse to go away.